A HELOC is a Home Equity Line of Credit. This revolving line of credit uses your home as collateral with the equity built in your property. Depending on the bank, you can borrow up to 90% of the equity in your home. Let’s say you have a house worth $250,000 with a $200,000 mortgage. You have $50,000 in equity. That means you can qualify for up to $42,500 using an 85% LTV. Velocity Banking is a strategy that is often enabled by the use of a HELOC.
2024 Notice: Due to rapidly changing rates, I will pause updating this page with the most recent rates. When doing your own research, realize that rates may change from week to week.
THREE WAYS TO USE VELOCITY BANKING
| Scenario | Savings | Method of Velocity Banking |
|---|---|---|
| Own Home >20% Equity | 6 Month Emergency Account | HELOC |
| Rent Home | 6 Month Emergency Account | 0% Intro, 3% Balance Transfer Credit Card Or use Plastiq |
| Rent or Own Home | 6 Month Emergency Account + Extra $5,000 or more | Use Extra Savings |
If you have a 6 month emergency savings account and an extra $5000 or more in savings, you can use the Velocity Banking Strategy with that extra savings. Dump the $5,000+ into the principal of your loan, then save the $5,000+ back up before you do it again. Repeat until your student loan or mortgage is paid off.
A HELOC IS NOT THE SAME AS A HOME EQUITY LOAN
With a loan, you pay amortized interest where you pay most of the interest up front. With a HELOC, you have a revolving line of credit with interest charged on the daily balance. If your HELOC is 3% APR, then you will be charged 3%/365 = 0.0000822% per day on the balance of your HELOC. If your balance stays at $10,000 for the entire month, you will be charged $10,000 x 0.0000822% = $0.82 per day x 30 days = $24.6 per month. Meanwhile that $10,000 you put towards the principal of your mortgage saved you thousands of dollars in interest and shaved years off your mortgage.
CHOOSING YOUR HELOC
I put together what I think are the 5 best banks for getting a HELOC. You can possibly get better rates at HELOC-dedicated financial institutions or certain credit unions, but it is much easier to pay off debt with velocity banking if you have a checking account and HELOC with the same bank coupled with online banking. Having both accounts with the same bank makes account transfers instant. There is no need to wait two to five business days to transfer money from one bank to another. You can easily manage your accounts through an app on your phone or the web browser. I also excluded all financial institutions that do not have online banking for their HELOC’s. No one wants to write a check every month to pay off their HELOC or use a HELOC convenience check to pay bills.
These top 5 HELOC’s have easy access to your money with available convenience checks, online banking, and debit cards. You can access and transfer your money 24/7 with these banks.
YOU WILL WANT A HELOC WITH NO ANNUAL FEES, NO CLOSING COSTS, AND NO APPLICATION FEES.
2024 Notice: Due to rapidly changing rates, I will pause updating this page with the most recent rates. When doing your own research, realize that rates may change from week to week.
1. Fulton Bank’s OptionLine
Personally, I opened up my HELOC and checking account with Fulton Bank to pay off my mortgage in less than 7 years. Fulton Bank’s HELOC is called OptionLine. The OptionLine is a variable interest rate HELOC that allows you to pay interest-only payments with a minimum of $50 per month. If your interest accrued is only $10, you still have to pay $50 where $10 goes towards interest and $40 goes towards principal.
With Option Line, you can lock in up to 3 balances at a fixed rate ranging from 6 months to 15 years. The catch? Each rate lock will cost you a fee of $100. (The fee is not applicable to residents of Maryland for some reason). I think it’s better to stick with the variable rate. I have had my OptionLine HELOC for almost 3 years. In the first 2 years, my rate never exceeded 3.00%. In 2022, my rate increased with the prime rate. It now sits at 6.75%.
With the lowest introductory rate on this list and a competitive variable rate, Fulton Bank is makes the #1 spot again.
- Introductory fixed rate: 4.99% for 6 months
- Standard Variable Rate: 7.75% (10.00% for investment properties)
- Draw Period: 5 years followed by 20 year repayment period
- LTV (Loan to Value): 80% (75% for investment properties)
- Interest Only Payment Plan: Yes, $50 Minimum
- Interest and Principal Payment Plan: Only after 5 year draw period
- Min and Max line of Credit: $5,000 Min. Max value is not published.
- Rate Lock Option: Up to 3 balances at a fixed rate ranging from 6 months to 15 years
- Limited Time Offer: 0.25% rate discount when automatic payments are setup plus Overdraft Protection when combined with Fulton Checking account.
- Currently operates in 5 states: PA, NJ, MD, DE, VA
2. M&T Bank’s ChoicEquity
After convincing my friends to try Velocity Banking, they went with M&T’s ChoicEquity HELOC to pair with their already existing M&T checking account. Like some of the other banks in the list, M&T allows you to lock in a fixed rate for up to three balances. M&T offers two forms of HELOC. You can choose the interest only option or you can go for the higher payment HELOC where you are required to pay both interest and principal each month.
My friends variable interest rate is currently floating around 7.25% which is more expensive than Fulton Bank’s OptionLine HELOC and Citizens Bank’s HELOC. M&T’s Variable Rates depend on the state you live in and the HELOC amount. Rates may vary as much as 0.200% between states assuming the same HELOC value. To get their best current rate, you need a HELOC of $100,000 or more. Check your rates here.
- Introductory fixed rate: 6.49% for first 6 months.
- Standard Variable Rate: 7.74%
- Draw Period: 10 years followed by 20 year repayment period
- LTV (Loan to Value): 85.99% (70.99% for Manufactured Homes and Vacation Homes)
- Interest Only Payment Plan: Yes
- Interest and Principal Payment Plan: Only after 10 year draw period
- Min and Max line of Credit: $15,000 to $1,000,000 (Max $250k for vacation homes)
- Rate Lock Option: Up to 3 balances at a fixed rate ranging from 6 months to 15 years
- Limited Time Offers 6.49% for first 6 months, which is 0.51% lower than the prime rate (7.00%) as of 12/27/22.
- Currently operates in 12 states: CT, NY, NJ, PA, DE, MD, D.C, VA, WV, VT, NH, and ME .
3. Bank of America
Bank of America is the largest bank on this list with over 4500 branches operating in most U.S. states. However their website is lacking some information. Unfortunately, there is no data on their LTV percentage. If you can find it, comment on this post below and I will add it to this comparison. While they have zero application fees, closing costs, and annual fees, they have the highest variable rate on this list.
- Introductory fixed rate: 6.24% for 6 months
- Standard Variable Rate: 8.65%+
- Draw Period: 10 years followed by 15 year repayment period
- LTV (Loan to Value): 90%
- Interest Only Payment Plan: Yes
- Interest and Principal Payment Plan: Only after 10 year draw period
- Min and Max line of Credit: $25,000 to $1,000,000
- Rate Lock Option: 1 to 15 year fixed with no rate lock fee. Minimum $5000.
- Limited Time Offers of 0.25% discount for automatic payments and up to 1.50% discounts for initial withdrawals. Further 0.125-0.375% discounts available for Preferred Rewards clients.
- Currently operates in most states with over 4500 branches
4. TD Bank
TD Bank offers the most options when it comes to their HELOC. You can choose to pay a $50 annual fee for the lower 7.59% to 8.49% rate, or you can choose the no annual fee option for a higher rate of 9.69%. No matter which option you choose, you will have to pay a $99 origination fee upon account opening. To qualify for their best rate of 7.59% (As of 12/27/22), you need a HELOC of $200,000 or more. If you borrow 100,000-199,999, you can qualify for 7.69%. If you decide to open a HELOC on your investment property, the best variable rate you can get will be 8.49%.
- Introductory fixed rate: N/A
- Standard Variable Rate: 7.59% (9.49% for investment properties).
- Draw Period: 10 years
- LTV (Loan to Value): N/A
- Interest Only Payment Plan: Yes
- Interest and Principal Payment Plan: Only after 10 year draw period
- Min and Max line of Credit: $25,000 to $500,000
- Rate Lock Option: Yes
- Limited Time Offers of 0.25% rate discount with TD personal checking account.
- Currently operates in CT, DE, FL, ME, MD, MA, NH, NJ, NY, NC, PA, RI, SC, VT, VA, D.C.
5. Citizens Bank Home Equity Line of Credit
From 2021 to 2022, Citizens Bank moved down from 2nd place to 5th place in my Top 5 list. They increased their rates and added an annual fee of $50, which is waived in your first year. They also made it more difficult to qualify for their lowest interest rate. To get their best rate, you need to have a great credit score, an LTV of 80% or lower, a HELOC of $200,000 or more combined with the 0.25% automatic payment discount, and the HELOC needs to be in 1st lien position. This is highly unlikely unless your home is almost paid off. Citizens variable rates can go from 2.5% to 21% depending on market conditions.
- Introductory fixed rate: N/A
- Standard Variable Rate: 10.25% and up.
- Draw Period: 10 years followed by 15 year repayment period
- LTV (Loan to Value): 80% (85% in Michigan)
- Interest Only Payment Plan: Yes
- Interest and Principal Payment Plan: Yes
- Min and Max line of Credit: $17,500 to $1,000,000
- Rate Lock Option: Yes
- Limited Time Offers 0.25% automatic payment discounts if using a Citizens Bank checking account. This discount only applies to those who live in DC, FL, IL, IN, KY, MD, ME and VA.
- Currently operates in 19 states: CT, DC, DE, FL, IL, IN, KY, MA, MD, ME, MI, NH, NJ, NY, OH, PA, RI, VA and VT
Other HELOC’s
Several banks temporarily stopped offering HELOC’s due to COVID and the current market conditions. These include banks like Chase, Wells Fargo and Citi Bank. If a bank charges too many fees for their HELOC, they don’t make the list. BB&T and Huntington Bank were among many that charged annual fees while charging higher rates than the banks that made the top 5. US Bank and several other online banks I checked out had very attractive introductory rates, but high barriers of entry and high rates after the intro period ended.
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